DESCRIPTION (adapted from the application) We propose a two arm randomized, partially blinded, placebo-controlled clinical trial to test the hypothesis that mycophenolate mofetil (MMF) alone or with daclizurnab (DZB) will prolong the period of C-peptide production in subjects with new onset type I diabetes. A second aim of this study will provide the clinical material for the validation of surrogate markers for immunity to islet Beta cells. The study will be conducted jointly by the Barbara Davis Center for Childhood Diabetes in Denver and the Virginia Mason Research Center in Seattle and takes advantage of the annual accrual of over 80 new onset type-l diabetes at these institutions. The metabolic end-points of this study will be fasting and stimulated C-peptide, hemoglobin Alc, and total insulin dose. Levels of autoantibodies and T cell reactivity to islet autoantigens, both of which are surrogate immunological parameters specific for type I diabetes, will be followed. Measures of immune modulation will include serologic and T cell reactivity to recall antigens. The subject number allows for 80 percent power to detect differences significant at a 5 percent level. The study is innovative in that the agents to be tested have not previously been evaluated in type I diabetes, but are rational choices for interventions in an autoimmune disorder. The proposed surrogate markers use peptide tetramers to identify and enumerate antigen-responsive T cells. We believe the study is timely in that far less toxic immunosuppressive agents have been developed in the 10 year interval since Cyclosporine was found to preserve C-peptide production in new-onset patients. Our power projections are based on our extensive previous intervention studies and the choice of agents to be tested is supported by animal studies. MMF is an effective component of anti-rejection treatment of heart, kidney and liver recipients. It is effective for the treatment of psoriasis. The DZB anti-IL2 receptor antibody selected for use with MMF is effective in the treatment of acute renal rejection episodes. The safety of these agents in clinical use justifies a trial in type I diabetes, where 30 percent of new onset subjects run HbAlc levels that put them at high risk for vascular disease within 20 years.